Iterum Therapeutics’ Science Won’t Prevent Its Volatility

As the global rush for a novel coronavirus vaccine perfectly illustrated, we have become increasingly dependent on pharmaceutical concoctions. This has both positive and negative elements, as the opioid crisis has also demonstrated. But that’s why Iterum Therapeutics (NASDAQ:ITRM) is so compelling. Indeed, you might call ITRM stock the pharmaceutical of pharmaceuticals.

A close-up shot of a hand holding a variety of pills
Source: Shutterstock

That’s because this particular pharma focuses on solutions against multi-drug resistant pathogens or MDRs. According to the Occupational Safety & Health Administration, MDRs are “are bacteria and other microorganisms that have developed resistance to antimicrobial drugs.” They include nasty little “bugs” like methicillin/oxacillin-resistant Staphylococcus aureus and penicillin-resistant Streptococcus pneumoniae. Not my idea of a good time.

But it goes so much beyond that. From Iterum’s website, the company claims that at least 23,000 people die from MDRs, representing a worldwide crisis. Also, as our own William White reported, the Centers for Disease Control and Prevention “stated that this is an area where current therapies are lacking.”

Fundamentally, this augurs very well for ITRM stock, with the underlying company being one of the few to serve this area.

ITRM Stock Backed by Big Pipeline

More importantly, White notes that Iterum has “multiple treatments that have completed Phase 3 clinical trials.” Plus, “Approval for some of these treatments could come this year” and the commercialization process is already in the works.

Of course, the most significant aspect for investors and speculators is the price action. For ITRM stock, this is one of those cases where fundamental sentiment is matching up with market value. Yes, ITRM was all over the map in 2020 due to the coronavirus pandemic. But it’s looking to be one of the hottest stars of 2021, with shares up 61% year-to-date as of this writing.

Is this a clear sign to get on board? You might want to check out some important numbers before making your decision.

Big Opportunity Meets Bag-Holding Risk

First, let me reiterate that Iterum features a brilliant scientific basis. Based on the latest data from the CDC, “more than 2.8 million antibiotic-resistant infections occur in the U.S. each year,” and more than 35,000 people die as a result. In addition, 223,900 cases of Clostridioides difficile occurred in 2017 and at least 12,800 people died.”

So, the problem could be even worse than Iterum estimated. Cynically, this is a positive for ITRM stock. Also, because this is a worldwide dilemma, Iterum stands poised to be the global leader in addressing MDRs. Whether it actually happens or not, the company is at least positioned in an advantageous state.

Therefore, you might think that ITRM stock is a no-brainer. Certainly, chatter on social media indicates that it is. However, it’s also fair to point out that Iterum’s clinical road has not been traffic or incident-free. And this indicates that the pharmaceutical company, like other names in the sector, could be riding on key drug approvals — never a sure thing.

By the way, if we’re going to talk about sure things, we should at least remember the lesson from Workhorse (NASDAQ:WKHS). Many thought it was a shoo-in for winning the U.S. Postal Service contract to replace its aging fleet of mail carriers with electric vehicles. It did not turn out that way. While political rumblings may give WKHS some breathing room, the takeaway is that you should think twice when someone sells you on a no-brainer.

Going back to ITRM stock, in three instances where shares skyrocketed on much-higher-than-average volume, they tumbled downward shortly afterward.

  • On Sept. 30, 2020, ITRM closed at $1.05, up 64% against the prior session on volume of 213.9 million.
  • ITRM stock jumped nearly 34% on Jan. 20, 2021 to $1.74 on volume of 90.4 million.
  • On Feb. 9, ITRM gained over 47% on volume of almost 230 million.

Again, in each of these cases, investors who bought at the close ended up losing money on paper. Therefore, you want to be aware of the stock’s extreme boom-bust cycles.

Concluding Thoughts on Iterum

The above technical observation doesn’t always correspond to a paper loss, I should add. On Dec. 3, ITRM stock closed at 84 cents, up 29% on volume of 99.7 million. As I’m writing this, ITRM is trading hands at $1.61, so these buyers haven’t lost out yet.

However, as I mentioned, this is a peaky trade. I do like the science but this is a separate proposition from the investment narrative. If you must trade ITRM, I’d consider a very small position now, with the idea of keeping the powder keg dry for a possible discount later.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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